New Zealand deer velvet is now commanding some of the highest prices in the world, as demand from Asia grows.

Deer velvet produced in Russia and China used to achieve the highest price because it was perceived to be of the best quality, and New Zealand trailed behind in third.

But the quality of the Kiwi- produced product is now being realised, and after five years of price increases, New Zealand velvet matches Russian in price, Deer Industry New Zealand (DINZ) chief executive Dan Coup said.

"We have upended the ladder, and at long last our product gets the premium it deserves."

The price has been rising five to 10 per cent each year for the past five years. Farm-gate prices have increased from an average of $60 a kilogram six years ago to nearly $100kg in the season just ended, Coup said.

"It's something of a perfect storm. For the last five years we have seen relative market stability, and a modest increase in velvet prices, a trend we hope will be sustainable."

Velvet grows on stags each spring, and is removed humanely by veterinarians and accredited farmers before it hardens into bone.

An average of 4.5kg is removed from each stag, and New Zealand produces about 500 tonnes a year, with most of it exported to South Korea and China.

DINZ velvet marketing services manager Rhys Griffiths said demand was increasing in those countries, as a growing number of affluent consumers were looking for health foods containing traditional ingredients like velvet.

He said a lot of young oriental traditional medicine doctors were turning to New Zealand velvet because of its quality, safety and reliability.

Velvet is one of the most valuable and powerful ingredients in traditional Asian medicine.

Griffiths said it is being used in a growing number of supplements, drinks and tonics.

Velvet has also been developed into an anti-fatigue supplement, popular with students studying for exams.

One Canterbury farmer enjoying an increase in the velvet price is David Morgan, who farms 3000 deer at the 1000 hectare Raincliff Station, between Fairlie and Pleasant Point.

He has between 800 and 1000 stags, and is now focusing more on velvet production than venison.

"It's in a good spot at the moment. It's a good income, but it can be better." Morgan said he was fascinated by the additional markets and uses that could open up for the velvet.

DINZ is hoping free-trade negotiations between South Korea and New Zealand will benefit the velvet industry.

The South Korean government charges a 20 per cent import tariff and an excise duty of about 9 per cent, major impediments to maximising market opportunities, Coup said.